Food-Processing-Plant-Design-layout

Food Processing Plant Design & layout
VC (D) = variable costs at a production level of D
TC (D) = FC + VC (D)
This is the general form of the enterprise's total cost function.
Consider a simple case in which the variable cost function turns out to be a simple linear
function of the volume of production.
VC (D) = v D
The rate of change of the variable costs with the volume of production is called the
"marginal cost," or sometimes the "incremental cost". In this case we have simply
This implies that marginal costs are constant, and that the cost of producing a small
additional amount is always the same. If D is taken to be a discrete variable, then the
marginal cost is simply the cost of producing one additional unit of product when the
production is at some given level.
VC (D + 1) – VC (D) = marginal cost
Fig 11.3 A total cost function
Using the simple-linear cost function (Fig 11.3), the total cost function becomes
TC (D) = FC +v D
and profit is given by
Profit = TR (D) – TC (D) = (a D – b D2 ) - (FC +vD)
= - FC + (a -v) D – bD2 for 0 ≤ D ≤ a/b
= 0 otherwise
The-analyst who wishes to maximize profit under these conditions will then be interested
in the value of D, which maximizes this function. Thus if
a – v ≥ 0
If
a- v ≤ 0
the profit will be maximized for
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